Discussions on this matter have been going on now for nearly three years, with Israel caught between its allegiance to the US – which is concerned that Chinese investments.

Prime Minster and Defense Minister Benjamin Netanyahu speaks to the security cabinet after convening it to discuss Gaza rockets fired at Tel Aviv

(photo credit: ARIEL HERMONI / DEFENSE MINISTRY)

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After three years of deliberations and intensive pressure from Washington concerned about the scope of Chinese investments in Israel, Jerusalem announced Wednesday it will establish an advisory committee to vet foreign investments.

The decision to establish the new body came at a meeting Tuesday of the security cabinet. The advisory committee, according to a statement issued by the Prime Minister’s Office, will be headed by the Finance Ministry and will “examine national security aspects in the process of approving foreign investments.”

The committee will include senior representatives from the Treasury, Defense Ministry and National Security Council, as well as observers from the Foreign Ministry, Economics Ministry and the National Economics Council.

Referral for a recommendation from the newly established advisory committee will come from various regulatory bodies, and transactions that do not necessitate government approval -- believed to include most investment in high-tech firms -- will not come before the committee.

According to the statement, the establishment of this committee strikes the correct balance between encouraging foreign investments in Israel and ensuring the country’s continued economic prosperity does not compromise national security considerations.

This committee, according to the statement, will help integrate national security considerations in the process of approving investments in the fields of finance, communications infrastructure, transportation and energy.

With this decision, the statement read, “Israel joins many countries – including the United States, Canada, the United Kingdom, Germany, Australia and others, which have also formulated processes for improving the oversight of foreign investment for national security reasons.”

The new committee is to begin work in 45 days, and the security cabinet will meet again on the issue in six months to review the committee’s work and make any necessary adjustments .

The decision to set up the committee comes following massive Chinese investment in recent years in vital and often sensitive Israeli infrastructure projects, including the Carmel Tunnel project in Haifa, the Tel Aviv light rail’s Red Line, and the ports in Ashdod and Haifa, as well as the sale of the food giant Tnuva to a Chinese firm.

The US, meanwhile, had warned that it has “serious security concerns” with respect to Chinese management of the Haifa port, and that – as a result – it may reconsider allowing the Navy’s Sixth Fleet to dock there.

The issue of overseeing investments from China has emerged as one of the few points of friction between Jerusalem and Washington under US President Donald Trump, and it comes at a time when the US and China are involved in a fierce trade war.

In June, a major spending bill in the Senate – the National Defense Authorization Act – included language warning Israel against Chinese investments in sensitive infrastructure projects.

One reason that it took so long for Israel to make a decision on the matter was because it was trying to balance its interests between not wanting to do anything that could harm its relationship with its strongest ally, and another interest in not wanting to do anything to harm booming economic ties with China or place a hurdle in attracting investments into Israel, something which is an important engine of the country’s economy.

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